Suffering From 'Premature Accumulation'

I almost spit my half-chewed bite of banquet chicken across the room.

I was at a lunch meeting of a local financial planning association listening to a money manager talk with the usual buzzwords of non-correlated assets and deep value investing. (In this market, deep value investing seems to mean the value of your client's portfolio has sunk so deep they can only dream of digging their way out hopefully in their lifetime).

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The discussion meandered until all of the PowerPoint slides had been shown and we thankfully got to the question-and-answer session. This meant that meeting was almost over. Invariably at these affairs, someone will ask about a particular stock: Do you own it, what do you think about it, will I ever get back to even with it? That sort of thing. Then somebody (maybe it was me) asked him about another behemoth American conglomerate we all know--General Electric ( GE - news - people )--one that has been floating around at the bottom of the toilet lately, and if he was buying it at today's "deep value" prices.

That's when the presenter used the phrase that nearly made me launch the grease-covered luncheon yard bird across the room.

He said that his firm was not currently buying the stock, but that they held it in their portfolio. He said it was one of those stocks where they suffered from "premature accumulation." He was serious. He said it with a straight face, I swear.

There was a pause and then somebody (maybe it was me) said, "I think they make a pill for that. See your doctor." There was some nervous laughter, and the meeting kind of folded from there.

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"Premature accumulation" is what the smart guys in ties are calling that whole ugly process of recommending clients buy a stock and then standing by whistling as it soars right down the old Big Board until it nearly hits the floor face-down. These experts don't say anything at all about their P/E ratios and their intrinsic values and their hard stops and such letting them down. No, they're never wrong, they're just not right--yet. They "suffer" (his word) from premature accumulation. That doesn't admit a mistake, heck no, it's just a timing issue, folks.

So, let's learn something from these wise money guys.

1. If a fancy "money manager" admits that he suffers from "premature accumulation," make sure he's paying for lunch, 'cause that's probably all the short-term capital gain your clients are going to get from him.

2. If your client holds a stock that's never seen a better day than the day he bought it, guess what, they too suffer from premature accumulation if not outright portfolio dysfunction. Convince them to sell the dog, even if it was your recommendation--no, especially if it was your recommendation.

3. If your clients think they can buy any stock and make a long-term profit from it, get them to check their math. You know, and they need to know, they're probably better off with index funds and ETFs.

4. If you go to a luncheon where they're serving chicken, try not to spit it across the room when (not if, but when) the big-time money manager from out of town says something stupid.

Now, go convince your clients to open their first-quarter brokerage account statements and face the facts.

Hal M. Bundrick is a certified financial planner and registered investment advisorin Shrevport, La., and founder of the 401kAdvisory.com. Contact him at email@401kadvisory.com.